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Advertising arbitrage

Sergey Kovbasyuk and Marco Pagano

No 641, CFS Working Paper Series from Center for Financial Studies (CFS)

Abstract: Arbitrageurs with a short investment horizon gain from accelerating price discovery by advertising their private information. However, advertising many assets may overload investors' attention, reducing the number of informed traders per asset and slowing price discovery. So arbitrageurs optimally concentrate advertising on just a few assets, which they overweight in their portfolios. Unlike classic insiders, advertisers prefer assets with the least noise trading. If several arbitrageurs share information about the same assets, inefficient equilibria can arise, where investors' attention is overloaded and substantial mispricing persists. When they do not share, the overloading of investors' attention is maximal.

Keywords: limits to arbitrage; advertising; price discovery; limited attention (search for similar items in EconPapers)
JEL-codes: D84 G11 G14 G2 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-fmk
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Downloads: (external link)
https://www.econstor.eu/bitstream/10419/222607/1/1725590921.pdf (application/pdf)

Related works:
Journal Article: Advertising Arbitrage (2022) Downloads
Working Paper: Advertising Arbitrage (2022) Downloads
Working Paper: Advertising Arbitrage (2022) Downloads
Working Paper: Advertising Arbitrage (2022) Downloads
Working Paper: Advertising Arbitrage (2020) Downloads
Working Paper: Advertising Arbitrage (2020) Downloads
Working Paper: Advertising arbitrage (2014) Downloads
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